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Uncle Sam Wants You Investing In Poor Areas

When you invest in a business or real estate project in an "OZ," capital gains taxes on selling stocks, a business, or any other investment can be deferred. You put pre-tax dollars to work in an OZ, which delays the capital gain taxes owed, and the extra investment of pre-tax dollars — if it generates profits — defrays your capital gain.

A burgeoning marketplace of OZ funds has developed and enables you to invest the proceeds of a capital gain into a fund set up to invest in an OZ. Getting in on a fund isn't cheap, however, and $1 million minimum investments are common. Immediately, your reinvested capital gain is tax-deferred, putting an additional 15% or 20% more into your OZ investment.